- US District Judge Vince Chhabria threw fraud and unfair competition charges after botching BCH launch
- However, Coinbase will be facing a negligence lawsuit
In a court order issued August 6, US District Judge Vince Chhabria of Northern District of California, Coinbase will face a negligence lawsuit after botching the launch of Bitcoin Cash on its platform.
The move is the latest in the lawsuit brought by trader Jeffery Berk, that occurred in December 2017.
The Motion to Dismiss the Fraud Claims is Granted by the Judge
At the time, BCH was still very young, just four months old. Coinbase initially added the altcoin to its platform, resulting in a spike in its price. However, a subsequent decision to close BCH trading left users unable to sell at higher prices.
Following this, Coinbase was accused of insider trading.
“Even assuming Bitcoin Cash is a commodity subject to the Commodities Exchange Act, the complaint does not sufficiently explain how the launch manipulated the market for Bitcoin Cash or for Bitcoin. Nor does it plausibly or coherently describe Coinbase and Armstrong’s motive to manipulate the prices,” the judge said.
The document also exculpated Coinbase CEO, Brian Armstrong of the fraud,
“While the factual allegations paint a compelling picture of an incompetent launch by Coinbase, the complaint does not outline a coherent account of fraud by Coinbase, Armstrong, and Farmer.”
Coinbase Breached its Duty to Maintain a Functional Market
Plaintiff now has to move forward based on the negligence lawsuit.
“The fact that Coinbase halted trading within three minutes of the launch is indicative of dysfunction,” the judge said.
“The buyers has also identified precautions Coinbase could have taken to avert the massive spike in the price of Bitcoin Cash on its exchange.”
Coinbase could have announced the launch in advance that could have ensured liquidity needed for an orderly market, said the judge.
The exchange instead launched trading while purchase orders were pending, and “the buyers have alleged a plausible motive for Coinbase’s seemingly rushed decision to launch under subpar conditions,” concluded Chhabria.
To see all the court filings for this case: Berk v. Coinbase, 18-cv-01364: https://www.courtlistener.com/docket/6322857/berk-v-coinbase-inc/